Industrialization in Developing Countries: Challenges and Strategies | Lecture notes Economics

Module 5 in AE 12

(Economic Development)

Module 5: Week 5 (6 hours)

Industrialization and the Third World

At the end of Module 5, learners are expected to:

1. Describe the role of the media in stimulating the desire of less developed countries to

imitate the standard of living of the rich countries.

2. Illustrate the development experience of countries prior to industrialization.

3. Judge the economic development of England.

4. Articulate the reasons for industrialization

5. Grade the criteria of a sound industrial project.

The remarkable progress in transportation and communication has exposed the high standard

of living of the industrial countries to the Third World. Through foreign travels, periodical, and

movies the people of less developed countries have seen the many wonderful and modern

things which have been created by the industrial societies like the United States, France or

Japan. In contrast, many leaders of the Third World countries have realized the big difference in

their still primitive products of development. Thus, their impressions of an industrial economy

have further improve.

Henceforth, there has been a strong clamor among many of the Third World countries for

industrialization. For years, this has been their aspiration. Through industrialization they believe

they can eliminate the problems of poverty, insecurity, and overpopulation. No less than the

great Indian statesman Nehru said that the real progress must ultimately depend on

industrialization.

However, industrializing a less developed country is certainly not an easy task. There are great

obstacles along the long path of industrialization. It is not only massive capital, modern

technology, competent management, and skilled labor that are required. Well-developed

agricultural and commercial sectors are also needed. And of course, the most important

requirement for industrialization is the restructuring of values and institutions in society.

https://www.youtube.com/watch?v=1yKvwOydZFw&t=7s

Starting the Process of Modern Growth

Industrialization among the developed countries did not pop up overnight. Prior to

industrialization, they experienced changes such as:

Economic, social and political institutions were restructured to pave the way towards

industrialization.

There was a rapid technological improvement.

Factors of production like capital, labor, and entrepreneurial scheme were made to be

more responsive to industrialization.

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Module 5 in AE 12

(Economic Development)

Module 5: Week 5 (6 hours)

Industrialization and the Third World At the end of Module 5, learners are expected to:

Describe the role of the media in stimulating the desire of less developed countries to imitate the standard of living of the rich countries.
Illustrate the development experience of countries prior to industrialization.
Judge the economic development of England.
Articulate the reasons for industrialization
Grade the criteria of a sound industrial project. The remarkable progress in transportation and communication has exposed the high standard of living of the industrial countries to the Third World. Through foreign travels, periodical, and movies the people of less developed countries have seen the many wonderful and modern things which have been created by the industrial societies like the United States, France or Japan. In contrast, many leaders of the Third World countries have realized the big difference in their still primitive products of development. Thus, their impressions of an industrial economy have further improve. Henceforth, there has been a strong clamor among many of the Third World countries for industrialization. For years, this has been their aspiration. Through industrialization they believe they can eliminate the problems of poverty, insecurity, and overpopulation. No less than the great Indian statesman Nehru said that the real progress must ultimately depend on industrialization. However, industrializing a less developed country is certainly not an easy task. There are great obstacles along the long path of industrialization. It is not only massive capital, modern technology, competent management, and skilled labor that are required. Well-developed agricultural and commercial sectors are also needed. And of course, the most important requirement for industrialization is the restructuring of values and institutions in society. https://www.youtube.com/watch?v=1yKvwOydZFw&t=7s Starting the Process of Modern Growth Industrialization among the developed countries did not pop up overnight. Prior to industrialization, they experienced changes such as:  Economic, social and political institutions were restructured to pave the way towards industrialization.  There was a rapid technological improvement.  Factors of production like capital, labor, and entrepreneurial scheme were made to be more responsive to industrialization.

 Substantial improvement in transportation and communication and electrification were undertaken.  Social facilities and services were increased.  Agriculture and commercial industries became viable. https://www.youtube.com/watch?v=XPd5AmTEkdk The English Experience England during the Middle Ages had a pastoral economy. Its agriculture was basically primitive. Europe at that time was mainly under a feudal and manorial system. Economic activities were centered on inefficient agriculture. Feudal lords were more interested in wars. The Church despised materialism. The government was weak. Nevertheless, upon the expansion of trade and commerce in Europe, feudalism was relegated to the background. Towns and cities grew. The new merchant class became wealthy and powerful. Such commercial developments were further bolstered by interrelated events like the discoveries of the New World and new trade routes. The state – and not the Church – became powerful. It actively participated in trade and commerce. The first industrial society England was the first to industrialize its economy. More favorable circumstances made England to lead in industrial development. It was able to eliminate feudalism, and established a central government earlier than countries in Continental Europe. There was a comparative political stability due to geographic positions. England developed a larger and stronger middle class than other European countries. Mercantilism started in England, and later on the Industrial Revolution developed in the late 1700s. Inventions and innovations which were appropriate to local conditions gradually developed. The development of better techniques of production through machines and division of labor tremendously increased the rate of production. Under a laissez-faire environment, capitalism expanded. This stimulated the growth of the factory system. Thus, England has achieved an industrial growth. The benefits of Industrial Revolution did not remain in England. Other countries in Europe – and the United States – started to industrialize their economies. https://www.youtube.com/watch?v=xLhNP0qp38Q https://www.youtube.com/watch?v=ZT_Tt3MEhn

Big Mistakes in Industrialization May of the observations under this topic are based from the book Industrial Development by Murray Bryce. The author has assisted many developing countries who organized their development plans. Maximum benefits can only be acquired if the individual industrial projects are economically sound, feasible, and appropriate to local conditions. Not a few industrial projects in most developing countries could not even pass the most basic economic test. Many of these unsound projects were put up without proper evaluation. Such mistake was a great waste of scarce resources. Industrialization is a gradual and systematic process. It includes a network of interwoven skills and facilities. Such system can only perform effectively if there is a progression from the small to the large, from the simple to the complex. For a less developed country, it becomes impossible to do too many large and different things in a very short time. For instance, superhighways provide insignificant economic benefits if most of the farms have no feeder roads to the markets. Only the very few elites can enjoy the pleasure of travel while riding in their luxurious imported cars. https://www.youtube.com/watch?v=_6ZFUkENEOI https://www.youtube.com/watch?v=xEenvVNAEBE Criteria for Sound Industrial Projects Resources for industrial projects are scarce and expensive in developing countries. The only cheap ones are labor, and raw materials. Machines have to be imported. Components of industrial products are also imported, such as chemicals and other inputs. All these require precious foreign exchange like dollars to buy them. A good industrial project for developing countries should be able to meet the following criteria:  Economically sound and feasible or it should be waste of scarce capital, skills and time;  Stresses labor-intensive industries in order to reduce the wide-spread unemployment, underemployment, and disguised unemployment;  Its benefits seep down to the level of the masses;  Easily makes profit for the investors and the national economy;  There is a ready market, either at home or abroad, for the goods it intends to produce; and  It fits into the economic development program of the country.

https://www.youtube.com/watch?v=qLU-1lNZjOM Problems of Industrialization Countries which became industrialized after England had attained such economy were luckier. They used the machines and technology developed by the Industrial Revolution. British investments flowed in Continental Europe. Their attitudes, values and institutions were favorable to the industrial development. Max Weber, in his Protestant Ethics claimed that the thrift and industry of the Protestants were the cause of progress in Europe. He proved the direct correlation between the growth of capitalism and the Protestant religion. Likewise, the presence of colonies provided an advantage to the industrial pursuits of the colonizers. Such colonies became the suppliers of raw materials and the labor and buyers of industrial products. Most of these countries are now the less developed nations. For the less developed countries to industrialize their economies at this time is extremely difficult. In addition to changing their values and institutions and controlling their population explosion, they need massive capital to push vigorously their bid for industrialization. Leaders of the Third World countries have complained that foreign loans are too small to be able to fund their development programs. They also criticized the high interest rates of international financial institutions. Many economic nationalists have alleged that those foreign loans and bids are only for agricultural or rural development – not for industrial development. They claimed further those international financial institutions are owned by the industrial countries, and even concluded that such institutions are tools of the multinational corporations. Another problem is the very keen competition in the world market for industrialized products. The highly industrialized nations like the United States, Japan, England, France and Germany have a great comparative advantage. Products of the factories of the newly industrializing countries face a very slim chance in the world market. Such predicament is further aggravated by discriminatory trade practices of the industrial countries. Despite the WTO, they impose quotas, tariffs, and similar trade barriers against products coming from less developed regions. They cannot immediately retaliate because their economies are heavily dependent on the rich countries. https://www.youtube.com/watch?v=WpJTR-lAG6k https://www.youtube.com/watch?v=Cxaapj5kOWk Encourage foreign investments A most likely alternative for a less developed country is to encourage foreign investments. Singapore became prosperous because of foreign investments. This also happens in Hong Kong. However, in the experiences of the many less developed countries, foreign investments have only improved the economic conditions of the multinational corporations and their local representatives.

 Attitudes and values are likewise not suitable to industrialization. Assignment: Discuss Early Philippine Industrialization The Social Cost of Industrialization Industrialization spawns more investments, employment, production and income. In the process, more buildings, factories, and machines are being created in response to an increasing demand for goods and services. Likewise, industrialization serves as a magnet to people in the rural areas. They go to the cities to look for jobs or for business reasons. This increases faster the urban population. Hence, housing, health, education, transportation, communication, and other social facilities and services have to be expanded to serve the growing human needs. The poor are exploited The emergency of social problems in an industrializing society was also obvious during Industrial revolution in England. The introduction of machines ushered in the growth of the factory system and the eventual collapse of the flannel weaving industry in factories. The captains of industry exploited them in their desired to acquire more profits. Since there was no government intervention in economic activities, the capitalists abused ever more the poor factory workers. They worked like slaves, including women and children. And so, England became industrialized are the expense of the workers. References:

 Babatunde, M. A. and Busari, D.T. “Global economic slowdown and the African

continent: rethinking export-led growth,” International Journal of African Studies ,

 Hirschman, A. “The Strategy of Economic Development.” Paperback – January 1, 1978  Roland, G. “Economic Development.” Pearson. 2014

Industrialization in Developing Countries: Challenges and Strategies, Lecture notes of Economics

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Partial preview of the text

Download Industrialization in Developing Countries: Challenges and Strategies and more Lecture notes Economics in PDF only on Docsity!

Module 5 in AE 12

(Economic Development)

Module 5: Week 5 (6 hours)

 Babatunde, M. A. and Busari, D.T. “Global economic slowdown and the African

continent: rethinking export-led growth,” International Journal of African Studies ,

 Todaro, Michael P. & Smith, Stephen C. “ Economic Development” , 11th ed.

Addison-Wesley. 2011.